Credit Card Spend in 2016 and Beyond

Manufacturing Spend Shifting SandsThere was a time when the US Mint sold dollar coins online at face value, with free shipping, and allowed customers to pay with credit cards.  The coins were incredibly popular.  People bought the coins in huge quantities, paid with rewards earning credit cards, deposited the coins at local banks, and then used the banked funds to pay their credit card bills.  This deal, for many, was the “manufacturing spend” opportunity of a lifetime.  Unfortunately, the Mint’s goal of adding these coins to circulation didn’t pan out.  Few people used them as intended.  So, following media exposure, the Mint shut down the deal in 2011.

The end of fee free Mint Coins didn’t end the practice of manufacturing spend.  Far from it.  But there was no longer one single unlimited and free approach.  Instead, people branched out into many approaches: funding new bank accounts with credit cards; buying money orders; loading prepaid card accounts; etc.  Then, in 2013, Visa and MasterCard gift cards suddenly became PIN enabled.

With the development of gift card PINs, the new standard for manufacturing spend went like this:

  1. Buy Visa/MC gift cards with a credit card.  See: Best options for buying Visa and MasterCard gift cards.
  2. Liquidate gift cards.  See: Beginner’s guide to buying & liquidating Visa & Mastercard gift cards.

Both steps (buying and liquidating) often incur fees, but it is usually possible to keep those fees low.  As long as your total fees are less than 1%, the rewards earned from most decent credit cards are worth the cost.  In some cases, credit cards offer far greater rewards (such as those that offer 5X rewards at grocery stores or drug stores), so it’s OK to spend more than 1% when manufacturing spend.

Shifting sands

The problem with the current state of manufactured spend is that there is no solid “current state”.  I described, above, a general approach that many people use, but the specifics change every day: stores stop allowing credit cards to be used to pay for gift cards; options for liquidating gift cards dry up; and other manufactured spend opportunities, like REDbird, come and go.  While new opportunities occasionally arise, the trend is unquestionably negative.  Opportunities are dying faster than they appear.

Manufacturing spend with higher fees

As opportunities for low-risk and low cost manufactured spend dry up, those who want to continue manufacturing spend will have to look beyond the current standard techniques.  One approach is to accept higher fees.  As found in the post “How to increase credit card spend,” there are many options that include fees ranging from about 1.9% to 3%: pay friends with PayPal or Venmo; pay bills including mortgage and rent; pay taxes, etc.

The key to making the “higher fees” approach work is to make sure that you are earning rewards that outweigh those fees.  For a nearly complete list of options for increasing rewards, please see: How to increase credit card rewards.

UpdateThe Barclaycard Arrival Plus offer reference below as since changed. See our Best Offers page for the current best offer.

A simple example of earning rewards that overcome high spend fees, is a new credit card signup bonus.  Let’s take the Barclaycard Arrival Plus standard offer as an example: Earn 40,000 points after $3K spend in 3 months.  Since this card offers 2 points per dollar everywhere, you should have a total of 46,000 points after meeting the minimum spend requirements.  Points are worth 1.05 cents each towards travel (thanks to the 5% points rebate), so those 46,000 points are arguably worth $483 in travel.  If you use a service like Plastiq to meet the spend requirements, you’ll pay 2.5% in fees.  2.5% of $3000 = $75.  $75 is a cheap price to pay for well over $400 in travel.

Another common example is to use cards with great category bonuses.  Take the Chase Ink business cards, for example.  They offer 5 valuable Ultimate Rewards points per dollar at office supply stores, and for cell phone, cable, and internet services.  Staples, which is an office supply store, sells Visa gift cards online with a 3% fee for $300 denomination cards and a 3.5% fee for $200 cards.  If you have an easy and cheap or free way of liquidating those cards, then the 5X returns are clearly well worth the 3% to 3.5% cost.  To see why Ultimate Rewards points are so valuable, see: Membership Rewards vs. Ultimate Rewards vs. ThankYou Rewards. Which is best?

Manufacturing spend with increased risk

Instead of accepting higher fees, another option for manufacturing spend is to accept higher risk.  In return for accepting risk, you may actually make a profit in addition to earning credit card rewards.  Some higher risk manufactured spend techniques include: reselling; making loans via credit card, and funding fantasy sports league play with credit cards.

  • Reselling: The basic idea is to buy low, with a credit card, and sell high.  Ideally you’ll either make a profit or earn enough points & miles to make up for any loss.  Fulfillment by Amazon (FBA) is a key service to use to decrease the work involved.  Obviously, reselling takes a lot of work and there’s always a risk of losing money.  For more details about reselling, please see my recent post: Re-dipping my toes into reselling.  Also check out these resell-focused blogs: Tagging Miles, Big Habitat, Oren’s Money Saver, Miles Per Day.
  • Loans via credit card: I’m aware of two good options here.  Kiva allows you to make microloans with a credit card with no fee.  Unfortunately, they do not allow lenders to earn interest, so the best you can do is break even.  For details, please see: Kiva: loans, points, and miles.  Another option is Kickfurther (if you use this referral link, you’ll earn $5 to get started).  Kickfurther is a platform that lets companies seek short term funding from the Kickfurther community by offering a return on investment (such as 8% profit in 10 months, for example).  With Kickfurther, you will earn a profit with each offer that you fund as long as the company pays out as promised.  You can fund offers with a credit card, but you’ll be penalized 1.5% when you withdraw funds to your bank account.  One huge problem with Kickfurther is that the best offers tend to be fulfilled within seconds of being active.  You can read more about Kickfurther in this Kickfurther investment guide.
  • Fantasy sports leagues: If you like the idea of sports gambling, read this Travel Summary post: A New Way to Manufacture Spend: Daily Fantasy Sports Leagues. I haven’t tried it.  I’m not interested, but I expect many readers may be.  Please take Travel Summary’s caution seriously: “If you have a gambling problem, stop reading this post and call 1-800-522-4700.”

Going forward

As options for low cost and low risk manufactured spend disappear, I expect that many readers will lose interest in manufactured spend.  Personally, I don’t mind branching out.  It is the higher fee and increased risk options that are most likely to stick around long term.  The reselling option, in particular, seems like one that can never go away.  Sure, opportunities for reselling at a profit may decline as more people get involved, but I don’t see that as a deal breaker.  Reselling is just hard enough, and risky enough, to keep the hordes away.  Now its time for me to dust off my old Amazon Seller account…

About Greg The Frequent Miler

Greg is the owner, founder, and primary author of the Frequent Miler. He earns millions of points and miles each year, mostly without flying, and dedicates this blog to teaching others how to do the same.

More articles by Greg The Frequent Miler »

Pingbacks

Comments

  1. If something can’t go on forever, it won’t. Currently there’s wide availability to MS at 1% cost. With 2% and/or bonus category cards, MSing makes sense. But TANSTAAFL says somebody is footing the bill for that extra 1%, as MSing grows (and it is growing) that cost will ratchet up until the 1% opportunities dry up. At that point, MSing will make the most sense for meeting minimum spend requirements and the %cost will be less relevant.

    Caveat: This could take a while. The 1% opportunity is largely fueled by federal regulations and the banks appetite for making money off of the unbanked. Those forces create a considerable amount of inertia.

    • I wouldn’t necessarily say MS is growing. Sure we always have new people doing MS, but the heavy hitters (guys doing over 100K a month) is shrinking just because it’s not worth their time for a 1% profit. It’s definitely not worth mine. I’d rather spend that time on researching what I can resell that will give me a 20+% margin. Different strokes for different folks.

  2. For Fantasy Sports – I tested out Yahoo’s Daily Fantasy by loading $25 and then withdrawing it a week later to my PayPal. It was instant. So I loaded $1,900 the next time, played a few games and withdrew it a week later, it had to go through a review process but it was approved and I got my funds in PayPal. So I though I found a great way to MS and I loaded another $1,000. When I tried to withdraw, it sent me through another review process and I got my money back. But this time, they banned me and they refunded the money to my CC instead of paying out my PayPal.

  3. Question about paypal…

    I am grandfathered to earn 1.5% cashback.

    If i pay $1000 via evolvemoney and have no balance in my paypal account, will i still earn 1.5%?
    Will it be 1.5% (paypal) plus 1% cc?

    • Evolve just sent an e-mail. Whole thing is closing 2/1/2016.

      The good times were long gone, but it was nice to have around.

  4. “Opportunities are dying faster than they appear.”

    In no small part to bloggers creating circles and arrows. I really wish you’d tone it down and try not to ruin it for everyone.

  5. New to this but I’m looking at the British Airways Signature Visa and paying some large tax bills using it to get to $30,000 – totals fees including annual card fee is $676 but that gives me 130,000+ points and a free companion ticket – seems like it’s well worth doing but I have this nagging doubt I’m missing something obvious.

    • Speedwell, I don’t think you’re missing anything…the $676 will get you 100k Avios, right? Seems like a good deal to me. You could get your cost down by focusing more on regular spending over the year than making a few large fee-incurring tax payments, but that would obviously take longer.

    • That companion pass is of dubious value – must be on BA metal, and thus subject to fuel surcharges. Some find value in it, many don’t.

      The Avios themselves used on other airlines are quite handy.

    • Depends how you much you value Avios. If you are able/willing to fly on some of their partners such as Alaska or AA or domestically, you can avoid those massive ticket surcharges. Our family have used over 400,000 Avios to fly to HI from the West coast year in the peak time of summer. 25,000 per person RT, value about $500 = .02/point. If you were valuing the same, your 130,000 would come out to about $2,600 in value for $676 cost, savings of 74%. Certainly a good deal, particularly if you were going to pay $2,600 anyway.

  6. A manufactured spend option not listed above is credit card funding of new bank accounts. For me, this is the easiest way to meet the minimum spend for new credit cards, as it does not require any trips to drug, grocery or office stores for the purchase of gift cards followed by other trips to a KATE kiosk at Walmart or the customer center at RiteAid or Family Dollar to liquidate them. There are literally dozens of banks that allow initial credit card funding, and (at least) several also allow it for secondary accounts – not just the first account opened as a new customer. As long as you make sure to set your cash advance limit to $0 (or whatever minimum the card allows – I have found they vary quite a bit – even with the same bank), the charge will be rejected if it is considered a cash advance vs. a purchase. Even better, in many cases you will also earn a bonus for the new bank account by meeting some direct deposit, Bill Pay requirements and/or minimum balance requirements.

  7. 1. Paypal is definitely bad as is any of their subsidiaries .. their main goal is to shut down accounts, keep money .. their customer service is simply horrible and even legit businesses have issues with them. So I would simply rule out Paypal types.

    2. Somehow I get a feeling that you are holding back on some methods for yourself :D. I dont blame ya .. if anything comes out , the next day there are another list of blogs that copy those and illustrate that and within some time drones replicate that it is abolished.

    3. I have been long time reader of your blog. Some thing that I missed in this and many other blogs was way to automate this to the max extent possible. In my blog ( http://creditcardsteroids.blogspot.com/ … unabashed plugin of my blog), I tried to address some of these as I had similar issues to what you blogged about. I use apps and computer programs , mostly self designed, as well as video game types methods so that this cannot be another mental block. It could be something as simple as just using reminder notes on specific activites and stores etc. But you are right, the days of big bonus are gone and the other stuff are just okay types. The only way out is to automate this shit as this becomes more volume based business. It will be great if you or your commentors could review my site.

  8. I’ve heard Frequent Miler say that after he signs up for a new card, he immediately buys an AmEx gift card (like for $3,000) to fulfill the minimum spend requirement. Assuming I want to liquidate these large denomination AmEx gift cards in the easiest way currently available, do most people just use them to buy Visa/MC gift cards and then load them to BB via KATE?

  9. Looks like one of my Serve cards is now shut down. Not a good start to 2016:

    “We are writing to let you know that we have observed unusual usage patterns on your American Express Serve Account. Because of this, effective immediately, you will no longer be able to add money to your Account.1 We have made this change in accordance with Section 15.d of our Consumer User Agreement, which you can view here.

    Please be aware that you continue to have full access to the funds on your Account and can withdraw them at any time. Any applicable monthly fees continue to apply.

    Once your balance reaches $0, please close your Account online via your Profile page accessible here. Scroll down to the Close Account section and click “Close Account.”

    If you have any questions or would like to inquire further about this issue, you may write to us at the following address:

    American Express
    C/O Customer Relations 02-04-40
    4315 S 2700 W
    Salt Lake City, UT 84184-0440

    Thanks,

    The American Express Serve Team “

  10. I just received the same letter from Serve.

    My usage pattern consists of the following:

    Load $1,000 automatically every month from FIA AmEx in $200 increments each day at the beginning of the month.
    Withdraw $50 to one bank account.
    Pay bills until the remaining $950 is depleted.

    That’s it. If that’s a suspicious pattern, then everyone must be guilty.

  11. shoot … nice start to ms 2016 … bluebird just shut me down! am pretty low grade too … hardly ever reach the 5k

    FTbb seems to be reporting similar …looks like its blackbird day folks

  12. Almost everyone with Bluebird or Serve got shut down. I think we can count Bluebird and Serve as dead effective today. My guess is that they looked for any accounts in which the majority of debits from the account were not from regular use (e.g. not from using it as a credit card for spend)

  13. Can we use Forex investment trading brokers to meet minimum spend?

    Would we actually have to trade, or could we find our account with credit card then transfer funds over to the bank?

      • I think the primary concern would be foreign transaction fees. I’m not sure that there would be any other types of fees involved. And the Chase Sapphire card says it doesn’t charge foreign transaction fees, so perhaps that would be the way to go for that card?

        I’m unsure. I’m just getting started in the manufacured spending game (with pretty bad timing apparently).

  14. Reselling is the way to go. I discovered it through your sites and some of the others you posted and its allowed my wife to quit her job to focus on it full time. Too me it is way too much work to “break even” to earn points. Plus there are so many great deals out there that there really is no reason not to make some serious $$$ while also grabbing extra miles/points for your traveling pleasure.

  15. Reselling – better sell something that is very unlikely to be returned, because returns mean it has to be sold as opened box next time around and lose will be enormous. I’d never resell electronics and I’ve heard Amazon’s FBA has history of losing packages. Just one screw up results in potential enormous lose so cross your fingers and toes.

Leave a Reply

Your email address will not be published. Required fields are marked *